Benefits Uprating

4.4 p.m.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Work and Pensions. The Statement is as follows:

"With permission, Mr Speaker, I should like to make a Statement on the next stage of our welfare to work strategy for people with health problems or disabilities, and to report to the House the annual uprating of benefits.

"On the benefit uprating I can confirm that most national insurance benefits will rise by the retail prices index, which is 1.7 per cent. For the third year running retirement pension will be uprated by more than the RPIwith an increase of £100 a year from next April for singe pensioners and £160 a year for couples.

"The minimum income guarantee will rise by over £200 a year in line with the Government's aim of targeting extra help on the poorest pensioners. There will also be above inflation rises in maternity allowance and statutory maternity pay. These will be uprated from £75 a week to £100 a week. Most income-related benefits will rise by the Rossi index1.3 per centin the normal way.

"I shall place details of the uprating in the Vote Office and arrange for figures to be published in the Official Report.

"Ensuring that as many people of working age as possible are in employment is central to this Government's strategy to tackle poverty and social exclusion. We inherited a major problem of worklessnessnot just among those traditionally seen as unemployed, but for millions of other people who were offered little or no help to find work.

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"Between the 1970s and the mid-1990s, the number of lone parents on benefit and the number of people claiming sickness and disability benefits both trebled. As industrial restructuring took place, one in three men aged between 50 and state pension age were out of work and reliant on benefits. And one in five men aged between 50 and state retirement age were receiving an incapacity benefit. At a time when many people should have been given the help that they needed to find other work, they were written off.

"Over the past five years we have started to tackle this legacy through economic stability and our active labour market policies providing people with individually tailored help to move into work. As a result, employment is at record levels, with well over a million more people in work than in 1997. Long-term unemployment has been massively reduced and the number of lone parents in work continues to grow.

"But there is still more to do. There are nearly 4 million people of working age who are out of the labour market and on benefits. Of these, 2.7 million are receiving an incapacity benefitthat is nearly three times the number on jobseeker's allowance.

"But, as is clear from surveys, many people with health problems and disabilities want to work. Indeed more than three quarters of a million people on incapacity benefits tell us that they want a job. Just because people are on incapacity benefit it does not follow that they cannot worknine out of 10 people who start a claim to incapacity benefit expect to get back to work. It is right that we provide the proper support to help them do just that. We must continue to reform the tax and benefit system from one based on what people cannot do to one based on what they can do.

"For people off workthrough illness or disabilityit is often a lack of confidence or knowledge about the support and advice available that stops them getting back to work.

"Today I want to announce the first steps in a new approach to remove these barriers and help people realise their potential. Our proposals are set out in the consultation paper: Pathways to workHelping People into Employment. This sets out a new framework of help for those who through illness or disability have applied for incapacity benefit. It combines better and more intensive advice with mandatory work-focused interviews, new opportunities for rehabilitation, and new financial incentives to encourage people to move into jobs. We propose phased pilots of the new approach in six areas around Great Britain from next autumn.

"Let me make it very clear, this is not about forcing sick or disabled people into work. It is about encouraging people to look at their options and helping those who want to work to achieve their goal of getting a job. I should like to reassure the House that those with the most severe conditions will not be required to attend the ongoing intensive interviews. We all understand how important it is

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that the development of this initiative does not threaten their security and the vital support that incapacity benefit provides for them.

"Our new approach has a number of aspects. First, we need to provide the right support from the outset of a claim. We shall build on the current framework offered through Jobcentre Plus, and ensure that new claimants get early and frequent support once their claim has been sorted out. We shall train a new team of specialist personal advisers to help claimants stay focused on their capabilities, building on their expectation that they will return to work. We want as many as possible of those moving onto incapacity benefit to be seen as people with a working future, not people at the end of their working life.

"Secondly, some people with disabilities and health problems need specialist help to get back to work. In the past this has not been available, so we will be introducing ground-breaking rehabilitation programmes, working with the NHS, GPs and occupational health specialists to combine work-focused support with health-focused rehabilitation for conditions such as back pain and depression.

"These programmes will be tailored to people's individual needshelping people to understand the effects of their condition and working to increase their confidence to move back into work. Making the move from welfare to work is a big step. It creates uncertainty and financial worry. There is already a range of extra help available. The Disabled Persons Tax Credit guarantees a weekly income of £167 for a single person working 30 hours per week. This will increase to £189 per week from April next year when new tax credits are introduced.

"Today I can announce that we will build on this support by piloting a return to work credit for people leaving IB for work. It will be paid at £40 per week for 52 weeks where personal income is less than £15,000 per year. For someone returning to work 30 hours on the national minimum wage and the new working tax credit, this will guarantee an income of at least £229 per week for the first year in work, compared with £167 under the current system, and just under £80 per week on incapacity benefit.

"We realise too that the first step into work is a big one. Finding money for the first month's bus pass or for work clothes can too often be barriers to work. That is why today I can also announce we will extend access to the Advisers' Discretion Fund, enabling advisers to make awards of up to £300 to spend on anything that will help their client move into work.

"Better support for people with health problems will not stop with IB. We will also increase support for people with less severe health problems who move from IB to JSA but who might nonetheless face significant barriers to work, by ensuring that they automatically see a specialist adviser when they first claim JSA. I can also announce that we will

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refer these people to tailored support through the relevant JSA New Deal, without the normal waiting period of 18 months. We will further reform the system so that people awaiting an appeal are not moved onto reduced rate income support, but receive JSA and work-focused support.

"People with health problems or disabilities get support from a number of sources. Today I have outlined the role the state will play, but others have an important role too. We want to encourage an environment where as many employers as possible are managing health at work actively and positively. This makes good business sense. In an era of full employment and a tight labour market people with health problems or disabilities are an untapped resource that employers and the country cannot afford to ignore.

"We also want to support doctors who can sometimes face pressures to sign people off work. There is now clear evidence of the medical, psychological and therapeutic benefits work can have. So we will work with doctors to raise awareness about the importance of work retention or resumption in improving the health of their patients.

"To conclude, this package of reforms is about providing support to help people with health problems or disabilities move back into work. It is about fulfilling their desires to work and realising their own ambition. It is about changing attitudesboth their own and others. Those claiming IB will, I believe, respond to a focus on what they can do rather than on what they cannot. We are not abandoning them and denying them opportunity, as in the past, but supporting them with help towards a better future."

My Lords, that concludes the Statement.

4.14 p.m.

Lord Astor of Hever: My Lords, the House will be grateful to the Minister for repeating the Statement. The Government have lost their way on welfare reform. Recent figures from the department itself have shown that by the end of the Government's second term in office, the welfare bill will have increased to over £141 billion per year.

Between 199697 and 200506, it is predicted that welfare spending will increase by approximately £46 billion in cash terms and £20 billion in real terms. This means that by 200506 more will be spent on welfare than on health and education combined. These figures are nothing short of staggering, more so given the Prime Minister's pledge to reduce the "welfare bills of social failure".

What has happened to Labour promises on welfare reform and the abolition of means testing? Benefit expenditure is out of control, means testing is growing and real reform of the social security system seems to have been dodged. Instead we have had a confused mish-mash of spending on means-tested benefits, on universal benefits and on complicated tax credits.

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Despite promises to the contrary, the Government are means testing more and more people. I wonder whether the Chancellor of the Exchequer remembers his words to the 1993 Labour Party conference. He declared,

"I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved. The end of the means test for our elderly people".

Yet today we see further confirmation of an altogether different agenda.

The minimum income guarantee is to be worth far more than the basic state pension and is to increase in line with earnings, not prices. It will provide the base for the pension credit. More than half of pensioners will therefore have their total income determined by that means test and the value of the basic state pension will become irrelevant for them.

Once the pension credit is up and running, almost 60 per cent of pensioners will be subject to means tests. Does the Minister accept that the implications of the policy are not as clear-cut as the Government would have us believe when affirming that the pension credit represents a reward for savings? Can the Minister be so confident that she is rewarding savings when more pensioners than ever will face benefit withdrawal rates of at least 40 per cent?

It is widely acknowledged, including by the Government, that we are facing a pensions crisis and that many people are facing an impoverished retirement because of inadequate pension provision. I therefore add my voice to the rising swell of criticism of the Government's increasing use of means testingboth on the grounds that the system is too complicated and also that it offers an acute disincentive to save.

According to a report published earlier this year by the Prudential, more than £1.2 billion in benefits is going unclaimed each year because pensioners do not understand what they are entitled to. This situation will only be exacerbated by the introduction next year of the pension credit.

I turn to the Government's "Welfare to Work" agenda. This demonstrates a strange dichotomy in the Government's welfare policy. While statistics show an ever-increasing welfare bill, at the same time they show that unemployment is at a record low. That contradiction is in part due to Labour's failure to grasp the nettle of welfare reform. While moves to eradicate the so-called unacceptable culture of worklessness are to be welcomed, I question the validity of the Government's declarations on this issue.

For example, in a keynote speech in June, the Prime Minister outlined plans aimed at helping people on disability benefits back to work. However, as commentators were quick to note, his words represented nothing more than a reaffirmation of previously announced policy. There is a sense that we are continually going over old ground, throwing yet more wise words at a problem that has persisted and continues to persist. We do need to help people who are out of work back into jobs. We must seek to do more to help them. The Government are rightly seeking to help those on incapacity benefit who wish to

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work. Sadly, since 1997 we have witnessed increasing numbers of incapacity benefit claimants and this is a trend we must seek to reverse.

Despite all the activity in that area in the past, there has been much recent criticism of the Government's approach. A Public Accounts Committee report published in October on the New Deal for young people, found that many people would have found jobs without the programme, that the Government are not measuring outcomes effectively and that just 0.2 per cent of New Deal participants have suffered sanctions.

A report from the Work and Pensions Committee in the other place, published in July, concluded,

"Within the New Deal programmes, performance needs to improve",

while recent press coverage has affirmed that half of the Government's pet projects to help people in deprived areas are to be scrapped or merged, including action teams for jobs, the ethnic minority outreach service and employment zones. This all leads me to conclude that announcements on Welfare to Work represent reworkings of the script, often made in the run-up to the pre-Budget, or Budget, report.

The next 12 months represent a challenging time for the department. The scale of change is immense, with the pension credit, housing benefit framework changes, Jobcentre Plus roll-out and the Pension Service implementation to name but a few. The Government have set themselves a demanding programme. The need to ensure accurate and proper delivery in all these areas must be a central point of focus for the Minister and her departmental colleagues.

I take this opportunity to seek assurances on perhaps the most fundamental of the reforms currently being undertakenthe implementation of the universal banking service from next April. Can the Minister assure the House that the project is on track and that the transition to the new system will be both smooth and efficient? In the other place, Ministers have admitted that the number of benefit claimants who lack a suitable bank account rose by a quarter of a million over the past year for which figures are available. Moreover, the most detailed research on the issue has found that nine out of 10 people who will have to move over to the new system think that it has disadvantages and that four out of 10 were "entirely negative".

4.22 p.m.

Earl Russell: My Lords, I have always said that it is a basic skill of opposition to see all hell in a grain of sand. The noble Lord has just demonstrated that skill very clearly indeed. I see something a little more complicated here. One might possibly describe it as all purgatory in a grain of sand but it is even more complicated than that.

I remember one occasion when I became very tired of setting the same exam questions over and over again. I asked my wife to supply me with some, which she duly did. Our minds work in very different ways.

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One of my pupils who had just sat the paper came in, having no idea who had set it, in an utter rage, and said that it was an incredible paper that looked as if it had been set by Hieronymus Bosch. I add that it was the only paper that year on which he got a first-class mark, so it cannot have been too awful.

I wonder whether the Statement has been drawn up by Hieronymus Bosch as I see an incredible mixture of things within it. I see a good deal of generosity and a good deal of imagination in some of the small proposals. Many of the proposals concerning the new disabled person's credit and the run-on are welcome but I see them as coming within a general analysis of the difficulties of those who are out of work, which I regard as mean-spirited, harsh and, as I think the Minister knows, totally mistaken. These sit uneasily together. Hieronymus Bosch is perhaps somewhat to the point.

I wish to make a couple of points about uprating. I note that, as last year, we are told that most national insurance benefits will rise by 1.7 per cent. For form's sake I should ask what are the exceptions to most. I have done that before and have been told that it is trivial but those exceptions should be on the record.

I refer to another point that needs to be on the record. The MIG rise is in itself welcome but what is happening to the take-up figures for MIG? That has always been the interesting and the difficult point.

As regards the analysis of the New Deal and incapacity benefit, I should like, first, to remind the Minister of the passages in the Acheson report, confirmed in many other pieces of research, that there is a clear link between unemployment and sickness and that being unemployed makes one more liable to become ill. So, there is a causal connection that flows rather the other way from the way this document has it.

I should like the Minister to attempt at some stage a breakdown of incapacity benefit figures by area to see whether there areas I have been told by some of the voluntary organisationsa great deal more people on incapacity benefit in those areas where people have long-term difficulty finding work. I am glad that the Statement raises the question of the number of people over 50 who are out of work. Last time I was given that figure at the end of the previous government, it was 2,594,000. I should be glad to know what the corresponding figure is now and for some allowance to be made for the economic cycle in the change. It must, I think, have come down. The question is how much it has come down because it is on that that the Government should be judged.

As regards the analysis of people on incapacity benefit, we are told that they were written off because they were given benefit. Here is one of the places where I simply cannot follow the logic of the Statement. When someone is ill and unfit to work, I simply cannot understand the idea that giving them benefit, and indeed waiting for them to get better, is writing them off because, after all, this is not the Department of Health we are dealing with here. It was the

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Department of Social Security and is now the Department for Work and Pensions. It is not responsible for curing those people, it is responsible for making sure that they do not starve until they are cured. Calling that "writing off" is beyond my understanding.

What seems to me to be true of most of the areas concerned is that they are areas in which there is no work, or at least no work for unskilled, able-bodied and often ageing men. That, incidentally, has been grossly exacerbated in places such as South Wales by the failure of Corus. It makes one regret the more that there is no definite statement in the gracious Speech about the euro. The fall in inward investment has been catastrophic and that can only make the problem of shortage of work worse.

I happen to live next door to one of those areas, Carlton Ward, Kilburn, in which during the worst of the recession the percentage of the population on means-tested benefits rose as high as 37 per cent. The latest figure I have seen was only 24 per cent, which is a good improvement, but it is still one of the worst wards in the country. I cannot help having the suspicion that there is a postcode discrimination against job applicants coming from that particular ward. I believe that it has a reputation for being a rough and drug ridden place. I suspect that employers avoid employing people from there. Will the pilots investigate the question of whether there is genuine postcode discrimination? Will the pilots also investigate whether there is any correlation between the supply of local services and facilities and the difficulty of finding work, the decline of local bus services, the post office and the universal bank about which I agree with everything the noble Lord said? There is also the fate of the village shop which in many cases has closed after several arson attacks. Possibly, we can be told what happens to people when they believe that they have been totally forgotten. All these matters need attention.

When we begin to help those who are out of work, the first thing to doif there is anything about incapacity benefit which is constructiveis to reform the all-work test, because people who are classified as unfit, according to that test, do not in any way correlate with those who are working. Can the Minister say whether it is still true, as stated in DHSS Report No. 86, that one is more likely to get work if the all-work test finds one unfit to work?

The Annunciator has just announced that no further action is required. I should add that that statement did not come from these Benches. Indeed, we on these Benches would like to see the all-work test fundamentally reformed. It cannot be a proper test of unfitness to work if one is more likely to get work if one is found unfit rather than fit. As we have always said from its introduction, the test does not measure the effect of fatigue and acute pain. I am in correspondence at the moment with a former pupil of 40 years ago whose son suffers from myalgic encephalomyelitis and who has been found by the all-work test to be fit to work. Anyone who knows anything about ME, the medical genuineness of which

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has recently been confirmed by a major survey, will know that saying that people are fit to work when they have that disease can be at least a very limited statement. They need a better test before anything else.

When talking with people about the work they can do, one needs very badly to listen to their judgment of what they can do. Only the person concerned can know how much pain is being felt; no one else possibly can. Unfortunately, there are no decibels in which pain can be measured. So telling people that it is something which they can afford to ignore is a statement which must always be made from ignorance. One has to work with the grain of what the person is fit to do. Even if they believe that they are unfit when in fact they can workand this does happenuntil they can be convinced, they can be taken to the water but they cannot be made to drink. One has to go with the grain.

Finally, we have here a revised version of the Chancellor of the Exchequer's press release. I heard what the noble Baroness, Lady Blatch, said earlier today about the delay between making statements to the press and making them to Parliament. In this case it is quite a substantial matter. It might have been saved for just a few days until the secret could be shared with this House. It would not have cost a great deal. What was in that press release, but which is not in the Statement, is a very big threat of coercion. The Chancellor of the Exchequer said that people must take the jobs which are offered. That is an attempt to judge people's medical condition for them and that cannot be done.

As a result of the absence of those words from the Statement, am I to take it that wisdom has struck the Chancellor of the Exchequer in his old age or is it just that the nasty bit is hidden under the carpet? It may be that the Minister can tell us which.

4.34 p.m.

Baroness Hollis of Heigham: My Lords, I am in a dilemma because I should not reply at all as 20 minutes has expired. I am not quite sure what I should do, whether I should simply sit down and write to the noble Lord, Lord Astor, and the noble Earl, Lord Russell. I believe that the understanding of the House is that the Opposition speeches and my reply take 20 minutes. I do not know what to do.